Friday, March 09, 2012

What the New iPad means for Apple rivals: "No Air."

I've been having a somewhat spirited email conversation with colleagues who've been dismissive about the implications of the New iPad (that's what it's called — no numbers, no letters. Just iPad).

My take: I think they're missing exactly what kind of a milestone the New iPad represents.

When I look at the New iPad, I see Apple reaching a point where they're starting to turn off the oxygen taps on the other players in the (non-money-losing) tablet market — I'm absenting Amazon Fire and B&N Nook here, because both companies sell their product at breakeven or loss in the hopes of earning revenues on subsequent media sales.

The argument for this oxygen deprivation is clear on the consumer-facing side: To paraphrase the always insightful Farhad Manjoo over at Slate, Apple is playing a "just out of reach" game with its rivals, where they're continually introducing product that's a half-generation ahead of the competition, while dropping the price on the parity product to a price the rest of the field can't hope to match. The New iPad does that in spades: iPad 2 was a faster, thinner iPad 1, but the New iPad's Retina Display makes it a unique product in the tablet category, and it's priced at exactly the same as the last generation. Which is now being discounted by roughly 25%. No air.

But it's even more clear on the supply side, where Apple has put billions of dollars down to lock up key components: microprocessors, cameras and especially the Retina Display screens themselves, making it impossible or impractical from a marginal standpoint for its rivals to even build a comparable product at scale. In fact, they might not be able to for intellectual property reasons as well: Display genius and Apple engineering director John Zhong owns the key patent on screens with Super High Aperture pixels — a critical innovation preventing crosstalk and distortion in screens with ultra-high pixel density, like the Retina Display. No air there either.

What does this mean? Well, from this point, with tablets on course to surpass traditional PC sales in the next few years, we'll need to think of Apple's hold on the coming generation of computing as metaphorically equivalent to Microsoft's dominance of the trad PC...except much, much more potent.

Because Apple designs its own processors. It owns its own online app and media store. It owns its own B&M retail environment. And it owns the world's biggest online payments infrastructure, as defined by number of active credit cards on file.